Credit scores hit by card limits Saturday June 28, 6:56 am ET By Rachel Beck, AP Business Writer Credit-card lenders lower borrowing levels, which hurts consumers' credit scores NEW YORK (AP) -- Just as Americans grow more reliant on credit cards to help pay monthly bills, they're being hit with a one-two punch: Card companies are reducing borrowing limits for tens of thousands of consumers, which then can lead to lower credit scores. .... http://biz.yahoo.com/ap/080628/all_business.html I believe this is a very new development that will really hammer the ability of the consumer to spend. Basically, the banks are very edgy and started to reduce unused credit limits on suspect customers. The problem for such customers is that after the first credit reduction their total credit limit goes lower, their debt/credit ratio goes higher damaging FICO. This is a snowball effect: once one creditor lowers credit limit, the other lower theirs as well seeing dropping FICO. The end result is that the person won't have ANY credit left on his credit cards, just the debt that he can't afford to pay off.
This is not a bad thing at all. People need to stop using credit to buy consumables. It's amazing how much crap one can do without if you have to pay for it with money at the time of purchase. The only item that credit should be used to purchase is a home. When buyng this home, one should have a 10-20% down payment and the mortgage payment (principle, interest, & taxes) should not exceed 25% of the primary breadwinners income.
But "shoulds" only exist in a conservative / responsible eutopia. In an entitlement society such as ours, everyone has the right to a plasma screen, mcmansion, i phone, lexus, and all the consumable items advertised on tv. Morale, financial, and ethical responsibility is the exception not the rule.
I could not agree more. I would just add that those who ARE financially/fiscally responsible get punished for being so.
You are 100% "on the money" Ivan. So the "responsible" drop one by one as there is no apparent benefit of their responsible actions or sacrifice.